Monday, October 09, 2006

- Goldman believe Nokia's (NYSE:NOK) new ultra-thin handset platform has been pushed back until Spring 2007 (versus their expectations of an end-2006 launch date). With Nokia already suffering from gaps in its line-up during 3Q as Motorola drives the RAZR deep into the mid-end, and with rival vendors launching a strong slate of new products for the holiday season and beyond, they believe this delay exposes the company to increasing risks.

In their view the chances of a 2004-type market share collapse are slender. Nokia continues to launch attractive high-end products with ground-breaking functionality, and its low-end portfolio (backed by the company's broad distribution) remains solid. However, until mid-end product holes are plugged, the most likely outcome is that Nokia's near-term market share, ASP and gross margins will be in line with or lower than consensus estimates, and the stock will tread water despite its discounted valuation. Firm is cutting EPS by EUR0.01 in 3Q and 4Q (to EUR0.23 and EUR0.30) to reflect these risks, and they are now EUR0.01 below 3Q consensus. 2006E EPS is unchanged as they exclude the cost of CDMA restructuring. 2007E EPS of EUR1.15, Neutral rating and EUR18 price target are unchanged but the firm believes investors will require patience to realise the implied 17% potential upside.

Notablecalls: Motorola is eating Nokia's lunch. I've seen some of the new phone models Nokia plans to release soon. Fighting the likes of RAZR with brick-like phone that has a 4GB HDD just wont do it. Nothing sexy about it.